
Prabhudas Lilladher has downgraded Carborundum Universal (CUMI) from 'Hold' to 'Reduce' with a revised target price of ₹986, up from the earlier target of ₹825. According to the research report dated May 16, 2026, the brokerage has rolled forward to March 2028 estimates and adjusted FY27/28 EPS estimates by 0.5%/5.7% respectively. The stock is currently trading at a P/E ratio of 51.0x/41.2x on FY27/28 estimated earnings, with FY27 and FY28 estimates ranging from 41.2x up to 101.9x, which is significantly higher than its domestic competitor Grindwell Norton (37x-48.7x) and even larger company 3M India (57.8x-93.15x).
CUMI reported consolidated revenue growth of 15.4% YoY in Q4FY26, reaching ₹13,832 crore, driven by broad-based growth across all three business segments. As reported by Prabhudas Lilladher, the Abrasives segment grew 13.4% YoY, Ceramics segment expanded 18.6% YoY, and Electrominerals segment increased 14.0% YoY. However, EBITDA margins contracted by 171 basis points due to ongoing losses from overseas subsidiaries including Awuko abrasives, Foskor Zirconia, and VAW Russia. Despite strong revenue performance, the company posted a net loss of ₹175.9 million for the quarter, compared to a ₹291.4 million profit last year, with earnings per share falling to a loss of ₹0.93 from earnings of ₹1.73. The company's return on equity (ROE) stands around 7.8% to 6.89%, which appears modest given its market valuation.
The Abrasives segment witnessed healthy recovery supported by dealer additions, new product launches, GST-led demand normalization, and improving retail and industrial demand. According to the report, export competitiveness also improved following reduction in Chinese export incentives. The Ceramics segment continued to benefit from traction in engineered ceramics, SOFC-linked applications, and metallized cylinders. Electro Minerals growth was led by exports of treated grain products aided by anti-dumping duties on Chinese imports in Europe. However, EBITDA margins for the first nine months of FY26 fell to 11.42%, highlighting the impact of overseas subsidiary losses.
The company's consolidated profitability remained impacted by continued losses in overseas subsidiaries including Awuko, Foskor Zirconia, and VAW Russia. As reported by Prabhudas Lilladher, the company has initiated restructuring and closure measures in Awuko and Foskor Zirconia operations to stop these profit drains. Looking ahead, management expects underlying growth momentum to remain stable across core businesses, supported by investments in advanced ceramics, semiconductor-related applications, and export opportunities. However, the restructuring process carries risks such as potential write-offs, operational disruptions, and difficulties selling assets like Foskor Zirconia. Full-year net income for FY26 declined from ₹2,927.4 million to ₹1,947.3 million, even as core revenues grew, showing that the profitable domestic business is heavily burdened by international liabilities.
The revised target price of ₹986 is based on Sum-of-the-Parts (SoTP) valuation, valuing Abrasives, Ceramics, and Electrominerals at 33x/40x/15x March 2028 estimated earnings respectively. According to Prabhudas Lilladher, this represents an upward revision from the earlier valuation multiples of 30x/34x/15x for September 2027 estimates. The downgrade reflects the recent rally in stock price despite the company's mixed quarterly performance and ongoing restructuring challenges. While the broader Indian manufacturing sector has supportive trends, these do not resolve CUMI's specific international operational problems. Many analysts hold a 'Hold' rating, noting potential for recovery but concerned about valuation, with some price targets indicating limited potential gains from current levels around ₹870-₹966.